Many credit cards have rewards programs that are designed as incentives for cardholders to use their cards more frequently and for large purchases. A cardholder (consumer) typically earns rewards points on his or her credit card by making purchases with the credit card and can redeem rewards points for merchandise or services, or can use them to offset the card's unpaid balance.
One way of redeeming rewards points for good or services is for the cardholder to request a merchant to apply rewards points from his or her credit card to a transaction (e.g., a purchase) at the time of checkout for the transaction, such as when the cardholder provides his or her credit card information to the merchant. That approach is not optimal, however, because consumers often forget about their rewards points when making purchases and therefore neglect to use their points. Further, when making a purchase, a consumer may not know his or her rewards points balance or may be unsure of whether the balance is sufficient to cover the purchase price (rewards points often do not have a one-to-one relationship with the local currency). Likewise, a consumer may be unsure of whether their rewards points can be redeemed for the type of goods or services being purchased.
As a result, consumers tend to accumulate rewards points on their credit cards but redeem them infrequently. Consequently, credit card rewards programs may not be as effective as they were intended to be, at encouraging consumers to use their credit cards.